Posted: June 05, 2009
Why now is a great time to prepare your company for sale
Don't use the economy as an excuse not to sell your businessLarry Turner
You built your business, planned to sell it and retire in the next 12 months, but now the economy has forced you to change your plans. Your company is treading water and the last thing you want to do is think about preparing the business for market. This is a typical story for many company owners since the economy tanked the middle of last year.
But don’t use the economy as an excuse to put off your plans to sell the business.
Many of the strategies to increase the value of a business and get it ready for sale can also be used to manage through the difficult economy. Value creation in a business can be done in good and poor economic times, but it does take more discipline when times are difficult. Focus on these four areas to improve your business, make it more attractive on the market and emerge a stronger company once the economy improves:
1.) Assess and upgrade management: Take a serious look at your management staff and key employees and identify those positions that need to be upgraded. It is an employer’s market and there is strong talent looking for the right opportunity. The new blood is good for driving improvements in your business today and a key to increasing the attractiveness of your business when it goes on the market.
2.) Increase revenues and cash flows: When it comes time to sell your company, the financial results will be measured compared to your industry’s performance. If your revenue growth/decline is as good or better than the industry, then you have been successful in building the value of your company. Increasing revenues can be difficult during a tough economy, but you do have the ability to steal away customers from your competitors. Now is the time to get aggressive with programs targeted specifically at this prospect base. Use lower cost marketing programs, such as public relations, telemarketing, pay per click web advertising, search engine optimization and email marketing to make the most of your budget.
3.) Recurring revenue stream: Find opportunities to generate new revenue and more specifically recurring business. For instance, a telemarketing firm I have worked with in the past started a new program that included a database and 50 hours of telemarketing activity from dedicated callers. It turned out that I was thinking of starting something similar, but their program was enough incentive to get me to sign up instead of doing it myself. They promoted this service to those already in their database through an e-mail blast. It was not only successful, but also very low cost to run the program.
4.) Get your books in order: Now is the time to cleanup your legal and financial records. Your legal records will be reviewed by potential buyers and any board meeting minutes that are not up to date indicate that there may be other issues in your business that need to be addressed. The last thing a potential buyer wants to hear when at the negotiation table is something having to do with “normalizing” expenses and cash flows because of what the owner took out of the business. Make those changes now, so you do not need to put yourself in a negative position at the negotiation table. Changes might include adjusting your salary to the industry norm and eliminating cross charges with other companies you may have setup to fund some of your interests.
At some point, the economy will improve and the acquisition of privately held businesses will heat up again. We are all getting older, and the need to transition a business will not go away. When this happens, you can expect to a large number of businesses come onto the market. Those companies that took the time and effort to get prepared will be the companies that will sell first and at a better price than those that only survived during 2009.
Don’t let the economy be an excuse to be a slave to your company and delay any retirement hopes you may have.
Larry Turner is CEO of Roundhouse Advisors, Inc. and has over 25 years experience growing, starting up, repositioning, and revitalizing organizations. Roundhouse Advisors is a consulting practice focused on helping businesses increase enterprise value by managing pain, growth and owner exits. Larry is a consultant, public speaker, and the author of “Owner Exit Planning: Leave On Your Own Terms." For additional information visit www.RoundhouseAdvisors.com